Kapco Mfg. Co., Inc. v. C & O Enterprises, Inc.

• Decision Date: 11 August 1989
• Docket Number: No. 88-2023,88-2023
• Citation: 886 F.2d 1485
• Parties: KAPCO MANUFACTURING CO., INC., Plaintiff, v. C & O ENTERPRISES, INC., Thomas Carter, Jack O'Neil, the Shelburne Co., A.G. Busch, Inc., Bruce Creger, Richard Wharton, Richard Kinzalow, Roy Thomas, Inc., Roy Jackson, Thomas Fogarty, Margaret Groves, Texaco, Inc., Amoco Oil Co., Inc., and Programmers Investment Corp., Defendants-Appellees. Appeal of Eugene F. FRIEDMAN.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1485

886 F.2d 1485

14 Fed.R.Serv.3d 1332

KAPCO MANUFACTURING CO., INC., Plaintiff, v.C & O ENTERPRISES, INC., Thomas Carter, Jack O'Neil, the Shelburne Co., A.G. Busch, Inc., Bruce Creger, Richard Wharton, Richard Kinzalow, Roy Thomas, Inc., Roy JacksonThomas Fogarty, Margaret Groves, Texaco, Inc., Amoco Oil Co., Inc., and Programmers Investment Corp., Defendants-AppelleesAppeal of Eugene F. FRIEDMAN.

No. 88-2023.

United States Court of Appeals Seventh Circuit.

Argued April 25, 1989.

Decided Aug. 11, 1989^*.

Opinion Oct. 13, 1989.

Eugene F. Friedman, Robert M. Tarnoff, Daniel E. Beederman, Schoenberg, Fisher & Newman, Richard M. Fogel, Schiller, Klein & Steinberg, Chicago, Ill., for plaintiff.

Matthew J. Iverson, Abramson & Fox, Chicago, Ill., Jesse J. Holland, McCoy, Holland & Seavy, Medinah, Ill., Robert A. Lewinthal, Lewinthal & Sklamberg, Glenview, Ill., Marvin A. Tenenbaum, Alexander, Unikel, Bloom, Zalewa & Tenenbaum, Chicago, Ill., for defendants-appellees.

Before WOOD, Jr., CUDAHY and EASTERBROOK, Circuit Judges.

PER CURIAM.

Eugene F. Friedman appeals from the district court's order imposing sanctions against him pursuant to 28 U.S.C. Sec. 1927andFederal Rule of Civil Procedure 11.The district court's order required Kapco Manufacturing Company("Kapco") and its attorney, Friedman, jointly and severally, to pay the defendants $46,780.07 in attorneys' fees.¹Friedman contends that the proceedings below did not warrant the imposition of sanctions, and further, even if sanctions were appropriate, the district court abused its discretion in awarding this amount.The district court's order imposing sanctions was proper, and, with the exception of a remand on one issue, is affirmed.

I.Facts and Procedural History

Kapco, with Friedman acting as its counsel, filed a complaint against the numerous defendants, ² alleging that the defendants had misappropriated Kapco's right to manufacture and market a car battery charger known as a "Dash-Go."The case was assigned to Judge Ilana Rovner of the United States District Court for the Northern District of Illinois; within one month of its filing Judge Rovner was able to have the parties negotiate a settlement agreement.During the lengthy pretrial conference from which the settlement agreement evolved, the attorneys for the parties read into the record the terms of the settlement agreement.The district judge thereupon dismissed the case but retained jurisdiction to enforce the settlement agreement.The attorneys were instructed to submit a consent judgment setting forth in a written document the terms of the settlement.This normally would have been the end of the matter.But what followed was a plethora of motions filed by Kapco, Kapco's second filing of a complaint regarding these facts, and four published opinions--three in the district court and one in this court.These subsequent actions by Kapco and Friedman form the basis of the district court's decision to impose sanctions.

Following the settlement pretrial conference, Kapco and Friedman refused to cooperate with defendants' counsel in drafting the settlement agreement and consent judgment.Instead, less than two months later Kapco returned to court alleging that the defendants had breached the settlement agreement.Kapco sought an order reinstating the case, an order declaring that the defendants had breached the agreement, and an order restraining or enjoining the defendants from further breach of the agreement.Judge Bua, who handled the matter in Judge Rovner's absence, ruled that the dispute between the parties did not warrant reinstatement of the case or injunctive relief at that time and stated that the matter could be resolved by a motion to enforce the settlement agreement.He therefore refused to reinstate the case and ordered the parties to submit a consent judgment as previously ordered.Judge Bua stated that, in the event the parties failed to comply with this order, the transcript of the pretrial conference would serve as the final settlement agreement.Judge Bua ordered the defendants to provide Kapco with an accounting of their sales relative to the dispute and instructed Kapco that after receiving this accounting it could submit a motion for summary judgment on the issue of damages.Kapco was also instructed that with leave of court it could engage in appropriate discovery to ensure compliance with the settlement agreement.Kapco Mfg. Co. v. C & O Enters., Inc., 605 F.Supp. 253, 257(N.D.Ill.1985).

Despite these instructions by the district court, Kapco failed to cooperate with the defendants in submitting a consent judgment, failed to seek enforcement of the settlement agreement, and failed to bring a motion for summary judgment on the issue of damages caused by the purported breach.Instead, Kapco filed objections to the defendants' accountings (which the district court later determined were frivolous), filed a motion to take discovery from nonparties (which the district court later determined sought information not relevant to the dispute), and filed a motion for reconsideration of the order denying reinstatement of the case(which the district court summarily denied).In ruling on these motions, the district court again noted the failure of the parties to submit a final settlement agreement and therefore ordered that the transcript of the pretrial conference would serve as the final settlement agreement.

Still, a resolution was no closer at hand.A secondary skirmish erupted between one of the defendants, C & O Enterprises("C & O"), and Kapco over a billing dispute involving approximately $1,600 to which C & O claimed it was entitled due to Kapco's failure to perform its obligations in the settlement agreement.Consequently, C & O filed a motion to compel Kapco to perform under the settlement agreement.At about this same time Kapco filed (1) an "Emergency Motion to Disqualify" C & O's counsel on the basis that Friedman's former secretary recently had been employed by an opposing counsel's law firm, and (2) a motion for reconsideration of the district court's order denying Kapco's request to take discovery from nonparties.While these motions were being briefed Kapco appealed the district court's order denying Kapco's motion for reinstatement of the case.This court dismissed Kapco's appeal for lack of jurisdiction, stating that the district court's order was interlocutory and in the absence of a final order no appellate jurisdiction existed.Kapco Mfg. Co. v. C & O Enters., 773 F.2d 151(7th Cir.1985).

Kapco's next tack was to file another complaint in the district court which contained similar allegations as in the earlier complaint and requested relief for the defendants' alleged breach of the settlement agreement.Because this case was found to be related to the ongoing litigation, the case was assigned to Judge Rovner's docket.Kapco Mfg. Co. v. C & O Enters., 108 F.R.D. 55(N.D.Ill.1985).³Judge Rovner then held several days of pretrial conferences attempting to resolve this litigation.When this failed, Judge Rovner set an evidentiary hearing on the motion to disqualify C & O's counsel and a hearing on the defendants' alleged breach of the settlement agreement and damages.Kapco offered no objection to the hearings until the day of the hearings.On that day Kapco filed a motion to hold the hearings in abeyance, claiming that the district court lacked jurisdiction.Kapco argued that although the court of appeals had dismissed its earlier appeal, no mandate had issued and thus the district court lacked jurisdiction.This court's order dismissing Kapco's appeal, however, clearly stated that jurisdiction never vested in the court of appeals but remained at all times with the district court.Accordingly, the district court denied Kapco's motion.

The hearings proceeded and the district court first determined that evidence failed to support Kapco's claim that opposing counsel should be disqualified.Kapco Mfg. Co. v. C & O Enters., Inc., 637 F.Supp. 1231(N.D.Ill.1985).Next, the district court held a hearing on the issue of the alleged breach and damages.Also before the court were motions by the defendants to enforce the settlement agreement and to enjoin Kapco from instituting further filings related to the settlement agreement.The defendants requested sanctions (costs and fees) for their time spent in litigating this action.

The district court entered judgment for the defendants, finding, among other things, ⁴ that Kapco and Friedman "engaged repeatedly in duplicative and vexatious tactics fraught with bad faith in an attempt to unnecessarily prolong this litigation, to harass the defendants, and to drive them out of business."The district court concluded that Kapco and Friedman violated 28 U.S.C. Sec. 1927andRule 11 in four respects: (1) Kapco and Friedman filed numerous meritless motions (including motions to reconsider) and frequently falsely represented the need for emergency relief.(2) Kapco's president and Friedman engaged in correspondence with the defendants and opposing counsel that fell below acceptable standards and served only to harass the defendants and prolong the litigation.(3) The conduct of Kapco's president and Friedman at the hearings evidenced a disregard for an orderly and truthful resolution of the dispute.(4) Friedman's submissions to the court were lengthy, rambling, filled with invective, often recycled from earlier submissions, lacked in citations to authority, and filled with misrepresentations of fact and law.

The district court thereafter imposed sanctions against Kapco and Friedman, jointly and severally, in the amount of $46,780.07.This sum represented the cost and fees incurred by all defendants in defending the litigation, excluding, however, time and expenses incurred for the following: litigation during the period when Judge Rovner was absent from the bench and unable to monitor the case personally;...